STRUGGLING department store chain BHS is set to enter into a company voluntary arrangement (CVA) in a bid to slash its rent bill and save it from entering administration.

KPMG, recently engaged by the retailer to explore a number of options to shrink its store empire over its “unsustainable” rents, haa now prepared a CVA proposal for BHS Limited and BHS Properties Limited.

Will Wright, restructuring partner at KPMG and proposed ‘supervisor’ of the CVA, said: “For almost 90 years, BHS has been one of the most iconic brands on the UK high street, but in recent years has seen its profitability decline as it has sought to respond to changing customer behaviours, increased competition and the rise in omni-channel retailing.

“Today’s CVA proposals are one facet of a wider turnaround plan, and specifically tackle one of the business’ largest fixed costs, the onerous lease arrangements across its UK-wide store portfolio.

“While the company’s store estate is located across favourable retail locations, a number of these leases are unsustainable, predicated on terms which were originally negotiated some decades ago. With the support of its lenders, shareholders and landlords, the company will be able to reshape its debt and operational structure to a model more suited to today’s multi-channel retail environment. The company needs to secure at least 75% creditor approval for these CVAs.”

A CVA permits insolvent companies to pay their creditors over a fixed period of time – while continuing to trade – asuming the creditors agree to it.

The CVA proposes to divides BHS’s 164 store portfolio into three main categories, based on the commercial viability and strategic importance of each site.

A total of 77 Category 1 premises will be retained at current rents. For the next three years, rents will be paid monthly as opposed to quarterly.

A total of 47 Category 2 premises have been deemed viable if a reduction in rent is obtained. To this end the leases of 21 properties will be retained at a reduced equivalent monthly rent of 75%.

Meanwhile, the leases of 26 properties will be retained at a reduced equivalent monthly rent of 50% and a reduced equivalent monthly rent of 25% will be paid for a minimum of ten months at a total of 40 Category 3 premises.

KPMG says it will spend the next three weeks locked in talks with creditors to ensure they understand all the details of the proposal. The creditors will be able to vote on the CVA on 23 March 2016.

Around 150 jobs from its 450-strong head office have been placed into consultation, while some 200 management positions are believed to be under review.

Grant Thornton is understood to be looking at ways to ease the burden of the firm on its struggling pension scheme, facing a shortfall of around £500m.

In March 2015, retailer Sir Philip Green announced that he was selling BHS Group Ltd, which he had owned for 15 years – to little-known Retail Acquisitions, itself formed just a few months earlier, for £1.